worthless and highly volatile

Mexico City — The future looks bleak for Credito Real (CREAL*) shares, according to an analyst. The papers of the non-bank financial continue on the ground highly volatile and not recommended for investing.

“It is an action that no longer has value (…) any very circumstantial news can move it. There will be investors who will be guessing where it will go, but is being in a casino”, said the director of Economic Analysis at Black Wallstreet Capital (BWC), Amín Vera.

Vera said that this action has an additional risk, as with companies such as Aeroméxico and Homex. “One day you have a position and the next day dawns and all the money that was inside is lost.”

The end of January 2020 represented the beginning of a marked negative trend in the price of shares of the Multiple Purpose Financial Company (Sofom). At that time it reached MXN$26.30 per unit.

It subsequently fell to the level of $6.63 per share, an all-time low at the time. Investors regained confidence in the lender and managed to rebound to $17.17 per unit in August last year.

The date of making the payment of its obligations was approaching. It was a bond in Swiss francs for $170 million (US$184 million) that matured on February 9, 2022, which did not have a grace period. Investors already projected a default by the lender.

The negative omen came from the hand of AlphaCredit Capital, a finance company specialized in consumption and small and medium-sized companies; and the continuing accounting errors in its 2018 and 2019 financial statements that were related to its derivative position.

AlphaCredit announced to the investing public on April 4 that it entered commercial bankruptcy, after having been rejected on some occasions, such as on April 1 and in August 2021, according to information from the company.

Crédito Real and AlphaCredit were hit by the increase in non-performing loans. According to the analyst at BWC, the losses were disguised under the name of accrued interest.

“46% of his portfolio is classified as interest not collected, but accrued (…) this has been seen for two years,” he mentioned.

It seems that the path was redrawn by the consumer finance company. Vera mentioned that Crédito Real must start with a forced restructuring plan to be able to pay its obligations.

“They have spent weeks evaluating whether to enter Chapter 11, the Bankruptcy Court in Mexico or negotiate with the bondholders, with the banks. Eventually, they will end up presenting a restructuring planvery likely these days,” Vera said.

In March of this year, Crédito Real announced that it is restructuring its portfolio. She said that was evaluating the possibility of filing for Chapter 11 of the US Bankruptcy Law. However, the finance and public credit ministry mentioned in a statement that the company’s financial position is unfavorable.

The strategist explained that, to the extent that the company presents the restructuring plan, the share price could rise to $2.0 per unit, but if it does not convince “the money that was put in, it will remain in the ‘little ball’ ”.

For Vera, the little recovery shown by Credito Real’s bonds and shares has to do with investors who still have their money within the company and who do not accept that it is already lost.

doubts among investors

The image for applying for fresh financing abroad has been hit.

Recently, Unifin Financiera, a firm specializing in equipment leasing, declared that it is being unfairly punished by investors who have been affected by the defaults of their peers.

The company is approaching the expiration of a pending payment of US$200 million due in August and an additional US$700 million due at the end of the year.

“The blow is more outside. Crédito Real was sold abroad as a non-bank lender that lent to AAA portfolios and for that reason they could not accept that the non-performing portfolio was growing,” said Vera.

Gone is the financial institution that granted small loans at double-digit rates to people without access to a bank account in Mexico. Crédito Real stood out as the only Sofome to obtain financing in foreign markets, an option that has already diminished its image for its competition.

The Ministry of Finance explained that Crédito Real does not represent a risk for the stability or the functioning of the financial system; however, the authorities are monitoring the evolution of the sector.

Crédito Real announced on April 25 that it formalized the transfer of the shares of the capital stock of Sistema Radiópolis for the payment of an overdue loan by Nuncio Accipiens.

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